Why Sina Might Be Bought Out

By Eric Jackson, Senior Contributor03/09/11 - 08:30 AM EST

Stock quotes in this article:SINA, AAPL, SOHU, NTES, BIDU, YHOO, GOOG

NEW YORK (TheStreet) - Sina(SINA_) would be an attractive buy-out candidate.

In 18 months, it has created from scratch a Twitter-like service called Sina Weibo that -- as of last month -- surpassed 100 million users. That's something that took Twitter twice the amount of time.

To call Weibo a Twitter clone does it a disservice. It's actually much more functional than Twitter with a superior Apple(AAPL_) iPhone application, commenting and forwarding system, along with instant messaging and location-based services. It is more of a combination of Twitter and Facebook that a pure copycat of Twitter.

Since the start of last July, Sina's stock is up 146%, and its market capitalization stands at more than $5 billion. Remember that it was worth $2 billion when it was just known for its traditional advertising-supported portal business (which has also been on fire since last summer - just ask its competitors Sohu(SOHU_) andNetEase.com(NTES_). Sina also has almost $1 billion in cash.

Keep in mind that, since July 1, Sohu's stock has increased almost 100% on its own -- just on its ad-supported business. Although it has a Twitter-like microblogging service, it is far less popular than Sina's.

Therefore, even though Sina has seen its stock price soar since July, it is reasonable to argue that the "extra" value created in market capitalization for Sina relative to Sohu directly attributable to Weibo is only an extra $1.1 billion.

Yet, Weibo is a powerful platform to drive future growth for the company. We all understand this intuitively when we think about Facebook and Twitter. Twitter was recently valued in asecondary market stock sale (which has surprisingly turned out to be very accurate indicators of actual values later award by private sophisticated investors) at $7.7 billion. Yet, Twitter's revenues were reportedly only $45 million last year . Twitter is supposed to have 160 million users at the moment. Sina Weibo might surpass them in users by September.

Facebook was recently valued by General Atlantic Partners at $65 billion. Its revenues were$1.2 billion to $2 billion in 2010 . Facebook now has 500 million users worldwide.

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